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This paper explores the value of the final customer in business networks. The preferences of the final customer define the concept of the network customer. The central argument of this paper is that companies within networks of value-creating relationships can act as integrators, which by interlocking limited value perspectives, can approximate an absolute value horizon that includes network customer considerations. Such interlocking activity constitutes a managerial challenge. As such, the interconnecting activity extends companies’ value horizons and can be characterized as a relationship capability, which is managerial knowledge capital that is not residing within isolated organizational actors but within the interrelations between them. Accordingly, such knowledge becomes a significant resource that can be used by both the organizations to improve their network position. By deconstructing the notion of value, this paper demonstrates the need for greater conceptual clarity and operationalization of value in the wider field of marketing, and specifically for business-to-business marketing.

Purpose – The purpose of this essay is to explore further the concept of value cocreation from a service-ecosystems view, by considering the importance of networks and the configuration of relationships and resources in markets.

Methodology/approach – We use a conceptual approach to extend a service-dominant (S-D) logic, ecosystems view of value cocreation by drawing on the literature regarding networks in marketing and related research.

Findings – A service-ecosystems approach to cocreating value-in-context is proposed, which points toward networks as mediating factors in value cocreation because they influence the ability to access, adapt, and integrate resources by establishing exchange relationships and shaping the social contexts through which value is experienced.

Research implications – This research suggests that value cocreation is a complex and multidimensional process that is best studied in the context of dynamic networks or ecosystems of service exchange.

Practical implications – This research suggests that networks mediate value cocreation, and thus, firms should consider the configurations of relationships and resources to develop more compelling value propositions.

Social implications – This research draws on the idea that exchange relationships are embedded within society and suggests that processes of value cocreation not only draw on but also contribute to the social contexts that frame market exchange.

Originality/value of essay – This research extends the value cocreation and S-D logic literature by exploring the role of networks in service ecosystems. In this framework, networks are mediators of value cocreation because they enable access to resources and help to (re)shape social contexts through which value is derived.

Purpose – This chapter proposes three main objectives in relation to understanding customer involvement in business networks. First, to identify important aspects of the network structure and environment and how the actions of the customer and other network participants create and maintain these. Second, to identify and explore the mechanisms and processes of resource integration in the network. Third, to identify the capabilities and competencies that customers bring to the network, and to understand how these are enhanced and developed.

Methodology/approach – Conceptual.

Research implications – We recognize that aspects of the resources themselves are important and that the characteristics of the resource and the way in which partners align them were key components of resource analysis.

Practical implications – We note that the interaction of different operant and operand resource combinations opens new doors to customer knowledgeability and involvement, where power over either authoritative or allocative resources in itself will not guarantee value creation.

Social implications – We support the call for the development of more sociologically enriched and complex models of interagent resource exchange. In particular, we would advise the need for a better understanding of how different network structures and environments are created and maintained through domination, legitimation, and signification processes.

Originality/value of chapter – This chapter addresses the gap in our understanding of how customer involvement in business-to-business networks may influence learning, value cocreation, and innovation. This chapter makes an important contribution to research in the field in that it investigates how the inclusion of the customer in business networks alters current assumptions and practices.

We develop a concept of the global factory, first introduced by Buckley and colleagues (2004, 2009, 2010, 2011, 2014), as a stand-alone construct associated with significant predictive capacity, discuss dynamics of success of the global factory, and identify and analyze social mechanisms deployed by the lead firm head office.

We conceptualize the global factory as a form of a flagship network and augment internalization theory with insights from interorganizational networks research to explore the dynamics of the global factory’s origination and functioning.

We clarify under what conditions a global factory-type network is more likely to emerge and describe social mechanisms generated by the lead firm head office to help the global factory sustain itself and thrive. We argue that in order to benefit from potential efficiencies of the global factory, the lead firm head office must deploy combinations of social mechanisms. We further argue that the role of the lead firm head office is that of a joint value orchestrator and a social broker, in addition to the controlling intelligence function.

Future work on the global factory should include further conceptualization of social mechanisms deployed by the lead firm, exploration of operating mode heterogeneity within the global factory, and large-scale empirical research.

Lead firm managers should embrace the role of the joint value orchestrators and implement social mechanisms described in this chapter to facilitate smooth operation of the global factory.

Global factory governance further increases multinationals’ geographic reach and market power; yet, it is not a universal recipe for market success, and therefore global factories’ power to shape the global economy should not be overestimated.

By linking the global factory to networks literature, we have suggested a novel way to view the concept and articulated more fully its underlying assumptions. Further research on the global factory will help advance our understanding of the dynamics of the global economy and the role of multinationals, their head offices, and their managers in shaping the economy.

Performance of firms in network industries depends much on the creation of standards around their technologies, products, or services. Establishing standards requires committing large, irreversible, upfront investment while demand remains uncertain. This paper focuses on the real options involved in this investment problem. The conventional real options literature recognizes the waiting-to-invest option where firms could avoid regret by waiting until at least some of the uncertainty is resolved. However, early commitment of network investment has vital strategic effects on shaping the expectations of potential users and inducing them to adopt the standard, thus creating a strategic growth option. We develop a simple model to explore the tradeoff between this strategic growth option and the waiting-to-invest option. We solve for the optimal investment rules and find that for high uncertainty, the strategic growth option often dominates the waiting-to-invest option and reduces the investment threshold. Furthermore, the intensity of network effect enhances the strategic growth option. Our results have important implications to the strategies of firms in technology industries.

In this paper we present a systemic approach to modeling coopetition between firms that provides a methodology for analyzing the strategic incentives for organizations to engage in coopetition relationships (the why) and the organization design required to address the complexities inherent in such multifaceted relationships (the how).

We pursue a model-based approach that incorporates important conceptualizations adapted from competence-based management (CBM) theory and value network approach. We illustrate the applicability of our approach by applying it to the case of coopetition between IBM and Apple in the development of PowerPC CPU.

We show how modeling can contribute to our understanding of the strategic incentives for the organizations to develop a coopetitive relationship (“the why” of coopetition) and the organization design required for accommodating and addressing the complexities and dynamics of such a multifaceted relationship (“the how” of coopetition).

First, our findings echo some of the perspectives developed in coopetition literature. Second, the study has utilized value network-level analysis in examining coopetition.

The modeling framework reported in this paper can help management practitioners in structuring choice situations involving coopetition, both in terms of the incentives to engage in a coopetitive setting and the design of a value network that can accommodate the complexities inherent in such multifaceted relations.

The study this chapter reports focuses on how network theory contributes to the understanding of the internationalization process of SMEs and measures the effect of network capability on performance in international trade and has three research objectives.

The first objective of the study relates to providing new insights into the international market development activities through the application of a network perspective. The chapter reviews the international business literature to ascertain the development of thought, the research gaps, and the shortcomings. This review shows that the network perspective is a useful and popular theoretical domain that researchers can use to understand international activities, particularly of small, high technology, resource-constrained firms.

The second research objective is to gain a deeper understanding of network capability. This chapter presents a model for the impact of network capability on international performance by building on the emerging literature on the dynamic capabilities view of the firm. The model conceptualizes network capability in terms of network characteristics, network operation, and network resources. Network characteristics comprise strong and weak ties (operationalized as foreign-market entry modes), relational capability, and the level of trust between partners. Network operation focuses on network initiation, network coordination, and network learning capabilities. Network resources comprise network human-capital resources, synergy-sensitive resources (resource combinations within the network), and information sharing within the network.

The third research objective is to determine the impact of networking capability on the international performance of SMEs. The study analyzes 11 hypotheses through structural equations modeling using LISREL. The hypotheses relate to strong and weak ties, the relative strength of strong ties over weak ties, and each of the eight remaining constructs of networking capability in the study. The research conducts a cross-sectional study by using a sample of SMEs drawn from the telecommunications industry in Ireland.

The study supports the hypothesis that strong ties are more influential on international performance than weak ties. Similarly, network coordination and human-capital resources have a positive and significant association with international performance. Strong ties, weak ties, trust, network initiation, synergy-sensitive resources, relational capability, network learning, and information sharing do not have a significant association with international performance. The results of this study are strong (R2=0.63 for performance as the outcome) and provide a number of interesting insights into the relations between collaboration or networking capability and performance.

This study provides managers and policy makers with an improved understanding of the contingent effects of networks to highlight situations where networks might have limited, zero, or even negative effects on business outcomes. The study cautions against the tendency to interpret networks as universally beneficial to business development and performance outcomes.

Understanding when entrants might have an advantage over an industry’s incumbent firms in developing and adopting new technologies is a question which several scholars have explained in terms of technological capabilities or organizational dynamics. This paper proposes that the value network—the context within which a firm competes and solves customers’ problems—is an important factor affecting whether incumbent or entrant firms will most successfully innovate. In a study of technology development in the disk drive industry, the authors found that incumbents led the industry in developing and adopting new technologies of every sort identified by earlier scholars—at component and architectural levels; competency-enhancing and competency-destroying; incremental and radical—as long as the technology addressed customers’ needs within the value network in which the incumbents competed. Entrants led in developing and adopting technologies which addressed user needs in different, emerging value networks. It is in these innovations, which disrupted established trajectories of technological progress in established markets, that attackers proved to have an advantage. The rate of improvement in product performance which technologists provide may exceed the rate of improvement demanded in established markets. This mismatch between trajectories enables firms entering emerging value networks subsequently to attack the industry’s established markets as well.

Purpose – The aim of this chapter is to investigate how a focal market actor may design or redesign business models for improved value co-creation.

Findings – We posit that value is co-created in use as actors integrate resources in practices, which makes practices a fundamental unit of value creation. Greater density of resources, relevant to a specific practice and to the goals or mission of the actor, corresponds to greater value. The role of a provider is to support other actors in their value-creation processes by providing resources that ‘fit’ into their practices.

We identify 12 categories of business model design elements that need to be defined and developed in parallel. We conclude that a focal actor needs to strive for both intra-actor and inter-actor (meso-level) configurational fit of business model elements in order to enable purposeful co-creation in specific practices.

Finally, we propose that meso-level configurations develop in a three-phase process of origination, mobilization and stabilization. A focal actor wishing to improve co-creation in a network needs to develop value propositions not only for customers but also for other actor domains. Overall, the performative power of a market actor is dependent on its network position, the relative strength of its business model and the actor's ability to author compelling meanings.

Originality – The research contributes to the discussion on value co-creation by identifying three shifts in the unit of analysis: (1) we argue that use-value is co-created as actors integrate resources in practices, rendering practices a fundamental unit of analysis, (2) as practices are outcomes of business models, we identified business model design as a key unit of analysis for the improvement of value co-creation and (3) our view on business models is network-centric and we focus on how to introduce new business model elements in a specific actor network.

Practical implications – The realization of the fact that value creation occurs in networks of interdependent actors pinpoints the need for increased transparency both between functional silos and between actors. The business model framework identifies 12 design elements, which can act as a ‘checklist’ for managers wanting to engage in co-creative business models.